This will be the only major airline with free checked bags

JetBlue, long a hold-out among its low-cost airline peers, has given in.

Starting as soon as Tuesday, the airline will introduce a fare scale wherein the lowest-priced tickets won’t include a free checked bag, according to Bloomberg. That would make Southwest the only major American airline to allow all customers to check up to two bags for free.

JetBlue is also debuting redesigned “slimline” seats later this year, with less padding and a configuration that makes room for up to 15 more people on a 150-passenger plane.

The changes were announced in November, but customers have been enjoying the last days of the complimentary baggage policy until this week. By 2017, JetBlue expects the baggage policy change to boost its operating income by at least $200 million.

JetBlue’s consumer-friendly brand took a hit when it announced the planned changes in November. But that might just be a speed bump on JetBlue’s way to the bank: While JetBlue made only $21.99 million off its previously generous baggage fees in the first quarter of 2015, its more miserly competitor Delta made $198.1 million. Southwest, meanwhile, only took home $10.1 million.

Airline checked bag, reservation change fees just hit a record

The U.S. passenger aviation industry set new records in the first quarter of 2015 for checked bag and reservation change fees, according to the Associated Press.

Airlines made $1.6 billion from those fees, the highest amount for a first quarter since bag fees were introduced in 2008.

Part of the reason for the climb is simply that more people are flying, with 3.2% more seats filled year-over-year, according to the report. Airlines are putting the fees on more passengers, though, and fees are getting higher — the AP notes that some fees can reach a whopping $200.

Over the past 12 months, the airline industry has pulled in $3.6 billion in checked bag fees and $3 billion is reservation change fees, the AP said.

Art museums find going free comes with a cost

When The Broad contemporary art museum opens its doors this fall in Los Angeles, it will join the ranks of America’s big free museums, reviving a frequent refrain: Why aren’t they all free?

In the case of The Broad, it’s almost entirely philanthropy supporting the bottom line.

It’s a “gift to the people of Los Angeles,” said Eli Broad, who along with his wife, Edythe, provided more than $200 million for the museum. “They felt strongly that free admission was the best way to make great works of contemporary art accessible to all,” said a spokesman for the couple, who own works by Roy Lichtenstein, Andy Warhol, Jean-Michel Basquiat and Cindy Sherman.

The Broads are also longtime supporters of the Los Angeles County Museum of Art, which is one of three museums that received a $450,000 federal grant to explore a new business model that has already allowed the Dallas Museum of Art to go mostly free.

It’s one way museums are adapting to the popular perception that art should be free, despite the fact that public financing has been declining while museum attendance is climbing.

With the help of its own multi-year grant, the Dallas Museum of Art eliminated its $10 general admission — while still charging for special exhibitions — and saw annual attendance jump to 668,000 from 498,000. It also offered free memberships, now up to 100,000, and emphasizes audience engagement. “Now we know who they are. That data is worth a lot more,” Maxwell Anderson, director of the Dallas Museum of Art, told Fortune.

The museum has seen a 29% increase in minorities visitors. Latinos alone now account for 26% of the museum’s audience. The new members’ favorite work of art is John Hernandez’s 1992 “HI-C Avenger” and the most popular badge is “ringleader,” awarded when a DMA Friend brings three people to the museum.

Nationally, a typical museum gets only 4% of its earned revenue from admissions, Anderson said. Only the outliers, such as the Metropolitan Museum of Art in New York, get more than 10% of their earned revenue from admissions, he said.

Once a museum goes free, it’s hard to go back. That’s the case at the Bronx Museum of the Arts in New York City, which is nearing the end of a three-year grant that allowed it to drop its $5 admission and see its attendance rise to 80,000 from 30,000. When the grant expires, there will be a $250,000 hole in the budget unless they find another donor, said Jose Ortiz, the Bronx Museum’s deputy director.

Not all museums can find a way to survive as free, said John Robinette, senior vice president of economics at AECOM, a global infrastructure company that also works with museums. One example often held up as a model of free are national museums in the United Kingdom, but as Robinette pointed out, the government ordered them to go free in 2001, but financially “they didn’t get what they needed” to make up the difference. Alistair Brown, the policy officer for the Museums Association in London, said the switch to free admission saw attendance rise 150 percent but many lost up to 40 percent of their government funding. Some were then criticized for accepting sponsorships from oil companies. Regional museums have been harder pressed and about 40 have closed in the past 5 years, he said.

Back in the United States, only a few have re-instituted admission fees. In 2006, the Art Institute of Chicago faced public criticism when it changed its suggested $12 adult admission to mandatory. (It’s now $23, or $33 with a fast-pass to skip the lines.)

The most recent to change in course was the Indianapolis Museum of Art, which on April 7 added an $18 general admission and aims to increase revenue by 17 percent this year, Matthew Gutwein, the museum board’s vice chair said last week. But the new policy comes with its own costs, including community resistance. “I just feel like this is putting a barrier between the common man and the art museum,” Nancy Stone said at an Indianapolis town hall, as reported by WTTV. “I don’t want it to be a fortress. I want it to be accessible to everyone.”

Mind-Blowing Tool Used by Hedge Funds Costs Only $10

If you’re a hedge fund looking to crunch massive quantities of data, it’s generally cheaper to pay for space a la carte on Amazon’s cloud than invest in million-dollar hardware.

That’s the premise behind a spate of new finance-focused data shops turning out software that runs on the cloud. Ufora, a company profiled in Bloomberg Business, designs software that can process a trillion data points in minutes for the cost of a sandwich.

The technology is complex and involves a type of machine learning, or artificial intelligence, but computing power has become cheap enough that Ufora founder Braxton McKee can crunch a big market data model using only $10 worth of capacity on Amazon Web Services.

These privately-offered investments, which typically court only those who can invest at least $1 million, are having a tough time holding investors’ interest these days.

That’s partly because their high fees have become harder to justify given that recent returns have actually trailed those of cheap index fund-based portfolios, and performance is increasingly in step with that of benchmarks, meaning that mangers aren’t adding as much value or diversification.

Only a few years ago, a hotel that tacked on more than $30 a day in resort fees was considered rare. No longer. “There are now over 80 hotels that have resort fees of $30 or more in the United States,” says Randy Greencorn, manager of Resortfeechecker.com.

Why charge resort fees?

Hotels say mandatory resort fees are necessary because they allow them to keep room rates competitive. By breaking a mandatory resort fee from a quoted hotel rate, they add, they can make their rates look more attractive to potential guests.

Consumer advocates disagree. They say the resort fees, which are often added to the room rate later in the booking process, are deceptive and unethical. They are pushing the Federal Trade Commission (FTC) to put an end to the practice. So far, the FTC has issued warning letters to several hotel chains, but has not taken any legal action against the practice.

The legality of the fees may be decided soon by the Department of Transportation, which has some regulatory oversight in the way airfares and hotel prices are displayed in reservations systems. Advocates are pushing for a new rule that would declare mandatory resort fees to be unfair and deceptive.

The fees, explained

Of the 10 resorts on this list, 6 responded to FORTUNE’S request for comment. Greg Ciaccio, the area general manager for Provident Hotels and Resorts, which runs Provident Luxury Suites Fisher Island, left a voicemail message in response to an email query about the fees.

He said there was “value in the resort fee” and that Fisher Island was an “amazing island that’s very exclusive and there are a lot of resort amenities that are world class.” The hotel did not immediately respond to a follow-up email or phone call requesting clarification on the $107 fee.

A representative for the Arizona Grand Resort & Spa in Phoenix, whose mandatory fee covers “unlimited” high-speed wireless Internet access, athletic club, valet parking and in-suite coffee, among other amenities, said its surcharges vary by season. From March 1 through September 30, it’s $47 per day, but from March 1 through September 30, it’s lowered to $35 per day.

The Arizona Grand imposes the fee, which is disclosed before the final booking screen, because guests asked for it.

“Studies have proven that travelers prefer to book a lower room rate and pay the resort fee on top than to pay one bundled higher price,” says Emily Dille, a marketing manager for the resort.

A spokeswoman for the Belmond El Encanto said the hotel now charges a $35 per night resort fee. A fact-checker had verified the $39 fee last week, and it’s not clear if the property lowered the fee in response to being on this list. Allyson Fredeen, a spokeswoman for the Ritz Carlton Bachelor Gulch in Avon, Colo., says her hotel’s resort fee covers different amenities based on the season. For example, during the summer, it pays for on-site recreation, including bocce ball, badminton and horseshoes, as well as evening marshmallows at the fire pit. The fee can sometimes be waived when you book a vacation package through the hotel.

“The resort fee allows us the flexibility of adjusting the inclusions by seasons and new resort events and offerings, rather than making it static in the room rate,” she says.

Other resorts echo her sentiment, noting that by breaking out the fees, they are taking better care of the customer. A representative for the WaterColor Inn & Resort on Florida’s Panhandle, for example, suggested that failing to separate the resort fee would be unfair to guests.

“By not including the resort fee, we’re able to break out all of the amenities the guest will receive with this fee – an explanation that may be missed if this fee was included within the total rate,” says a resort spokesperson.

Perhaps the most creative explanation for the resort fee was offered by the Fisher Island Club. Vanessa Fioravante-Cuomo, a spokeswoman for the resort, pointed out that the compulsory $107 “membership” fee offers guests access to all the amenities, which include a championship golf course, world-class tennis courts, a Vanderbilt pool, an aviary with exotic birds and two deep-water marinas.

“The tax rate for the membership fee differs from that of the lodging fee,” she says. “Therefore, they are presented separately.”

It’s hard to find consumers who complain about luxury resorts charging high resort fees. But not as hard as finding guests who say they prefer having these surcharges separated from the room rate and displayed later in the booking process.

Barring any government action, one thing seems clear: These numbers will probably rise next year.

Why companies should have to pay checking account fees, too

Large companies are about to face the same financial hardship that individuals began to face more than a decade ago: The end of no-fee checking.

According to The Wall Street Journal, a number of large banks are considering charging large corporations a fee for having a checking account. The more money those companies have on deposit at a bank, the more they may have to pay. Why would that be?

The Journal says we should blame regulation. Since the financial crisis, regulators have been trying to make banks safer. And large, uninsured deposit accounts are a risk for banks. If banks lend against those accounts, and a company, or a few of them, move their accounts to a new bank, that could cause a problem. So, regulators are forcing banks to protect against this risk, which is making it more expensive for them to have these accounts. And banks are considering passing along those costs to companies, though most of the costs so far have to do with holding deposits in foreign currencies. Still, the new fees are making corporations, and their lobbyists, upset. The regulations were supposed to make banks safer, not make holding cash more expensive. Another unintended consequence of the Dodd-Frank banking reform bill!

But this may be more of a feature than a bug. In other words, it could be a good thing. Corporations get plenty of benefit from large banks. In fact, one of the reasons bank CEOs like Jamie Dimon argue that we need large banks is that corporations, the banks’ biggest customers, are also getting bigger. But, as we know, large banks can cause trouble for the banking system. But if large companies benefit from banks being big, why shouldn’t such companies also bear the burden of the risk that large banks create for the economy? Or at least more of those costs.

It’s been years since checking accounts were truly free for the average consumer. Nearly all checking accounts pay almost no interest. And plenty have annual charges if your balance falls below a threshold. The average fee for a consumer that uses an ATM machine not run by their own bank is now over $4. In all, banks charged consumers nearly $32 billion in overdraft fees in 2013. And even with no-fee checking accounts, you often have to pay to order checks, which makes it really hard to use your checking account without incurring a fee. What reason do banks give when they have to charge more and more fees? Increased regulation.

But that’s probably not the actual reason. Low interest rates mean banks can’t make what they used to by lending out deposits. For the past few years, the net interest margin—the spread between what it costs banks to borrow and what they make when they lend or invest—for banks has shrunk to an all-time low. What’s more, banks aren’t seeing robust demand for loans. Those two things—lack of loan demand and low interest rates— are what’s really driving banks to charge checking fees to both consumers and corporations.

But if you are a corporation, you can’t really complain about low interest rates. Companies have borrowed more than $1 trillion dollars this year, taking advantage of low interest rates. As for regulation and higher costs (to hold cash!), we can all agree that’s certainly something to complain about.

Flying high: Airline ticket fees are set to rise

Flying will be getting a bit more expensive later this month as the federal Sept. 11 security fee more than doubles.

The fee for one-way tickets will rise from $2.50 to $5.60, and the fee for round-trip nonstop tickets will increase from $5 to $11.20. Additionally, the per-trip cap of $10 will go away, meaning that trips with many layovers of more than four hours could really rack up fees, according to a report in The Wall Street Journal.

That’s not the only potential new fee for air travelers. Airports are seeking to hike the facility fee to $8 from $4.50 for every time you board a plane, and Customs and Border Protection wants to raise the immigration fee for international travelers to $9 from $7.

The new prices for the Sept. 11 fee go into effect for all tickets sold after July 21. The Journal writes that some in Congress, including House Speaker John Boehner, have written to the Obama administration saying Congress did not intend to lift the $10 minimum, and that it should be reinstated.

Private equity firm’s most ridiculous fees

FORTUNE — Private equity fund documents typically are kept confidential, but you still can learn a lot about firm economics from reading through information that firms must make publicly available via the SEC registration process. The key document is Part 2 of the Form ADV, which serves as a sort of disclosure essay for potential clients.

It’s within these documents that we often learn things like how many firms don’t actually employ some of the professionals listed in the “team” sections of their websites, even if they are listed there as “partners.” For example, some of these folks may actually be “operating partners” who actually get reimbursed by portfolio companies — effectively serving much more like on-call consultants than like in-house staff. We also learn all sorts of other mechanics, such as what types of extra expenses limited partners are, and aren’t, responsible for paying.

So I’ve been going through some of the Form ADVs this morning, and just came across arguably the most ridiculous example of LP fee responsibility.

The firm in question is Clayton Dubilier & Rice, a 36 year-old buyout firm that currently has more than $21 billion in assets under management. Notable investments have included Hertz, HD Supply and ServiceMaster.

According to its Form ADV, CD&R typically charges limited partners a 1.5% annual management fee on capital commitments to its primary funds (co-investment vehicles have different terms), which then drops down to 0.75% on remaining portfolio assets once the fund’s investment cycle has concluded.

Management fees typically are used by private equity firms to pay organizational and administrative expenses, such as salaries and office leases. And usually they must be paid back out of investment profits before the fund managers begin to collect carried interest (i.e., the firm’s cut of the loot).

CD&R’s explicitly identifies several areas in which the management fee is reduced pro rata, including undefined “organizational expenses… to the extend they
exceed a specified amount set forth in the relevant Fund documents” [sic]. But it also appears that LPs are on the hook for a variety of ongoing “administrative” expenses that any layperson would think of as ordinary overhead that should be covered by the management fee. For example:

Telephone charges

Internet website hosting and maintenance

CRM software

Public relations expenses

That’s right, CD&R generates around $94 million in annual management fees just from its most recent buyout fund, but apparently that isn’t enough to pay for web hosting or phone calls. Or even for press releases that, arguably, the firm is using to market itself. Imagine getting a bill from your financial advisor that included a small surcharge so that he could put up a billboard soliciting other clients? Pretty much the same thing.

Now it’s entirely possible that these “administrative” fees ultimately are reimbursed once the funds begin generating profits, but we would need to see the specific fund documents to know for sure. The Form ADV, however, suggests that they are not.

A CD&R spokesman acknowledged the fee carve-outs, but stressed that they are agreed-to by limited partners. “These are negotiated agreements between the firm and its investors,” he said.

No doubt, but why negotiate at all over such small potatoes, rather than absorb such expenses within the management fee. It does little to either boost the firm’s bottom line or do reduce the overall private equity industry’s ‘fee hog’ image.

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Private equity should standardize its investor agreements

FORTUNE — The SEC is investigating private equity for its alleged systemic use of “hidden” fees charged to portfolio companies and investors. Some of this involves charging portfolio companies for access to “operating partners” that investors had been led to believe were salaried employees of the firm. Some of it relates to miscommunication over which types of expenses are to be born by the fund as opposed to by the general partnership. Some of it may involve outright fraud.

Each situation is different, but there may be a common salve: Standardized limited partnership agreements.

To be clear, I’m not suggesting that all private equity firms charge the exact same management fees or take the exact same carried interest. Nor that each fund need have the same management structure or investment strategy. Instead, I’m arguing for the creation of an expansive “fill-in-the-blank” and “check the box” sort of document (or group of documents, given that there are certain jurisdictional specifications depending on where a fund and limited partner is based).

The fundamental principle of a standardized LPA should be fee inclusion. Rather than enumerating which fees are to be shared with limited partners (as many current LPAs are written), it would start from the opposite perspective: All fees are to be shared with LPs, with any exceptions to be enumerated. Same goes for expenses. All should be borne by the general partnership, save for those explicitly exempted in the LPA.

And then the coup de grace: No more side letters.

Now I know what certain GPs and fund formation attorneys are thinking: If you nix side letters, then every LP will know the deal every other LP is getting. For example, the fact that CalPERS is paying a lower management fee on its $100 million commitment than Family Office X is paying for its $5 million commitment.

Get over it.

First, most LPs recognize that there is value to “buying” in bulk. Second, private equity firms talk nonstop about alignment of interests. If a GP is putting in terms for favored LPs that are so embarrassing/egregious that it would cause smaller LPs to avoid subscribing, then perhaps the real problem is with those agreements rather than with the disclosure.

Moreover, standardized LPAs should reduce legal and accounting fees. Not only when drafting documents, but also when dealing with SEC presence exams and possible audits. And if you don’t want to lose your fund formation attorney’s special brand of creativity, ask him or her to work with the Institutional Limited Partners Association (ILPA) — which finally is beginning to draft such documents after several years of the issue being raised and then falling by the wayside.

Private equity is an investment strategy largely predicated on market inefficiencies. But there’s no reason for that buzzword to continue extending to the investor relations process. Standardized LPAs would be a giant step toward ensuring that limited partners really are partners, and not well-heeled dupes.

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